What is Rental Arbitrage?

Rental arbitrage is a common practice that involves a tenant renting a property from a landlord and then subleasing it to other individuals or renting it out on short-term vacation sites like Airbnb. Essentially, the tenant becomes a middle manager of the property, handling everything from renting it out to dealing with any issues that may arise.

Given the boom of the Airbnb market over the last decade, rental arbitrage has become increasingly popular. Landlords are often asked if they’re willing to permit it, since short-term rentals can often yield greater profits than long-term ones.

However, it’s important to note that rental arbitrage is a specific type of subletting. While subletting usually involves leasing a property to one individual for an extended period, rental arbitrage typically involves renting to many different short-term renters.

But is rental arbitrage legal? Generally speaking, it is, as long as the landlord permits it and short-term vacation rentals are legal in the area. It’s important to include clear terms about subletting policies, conditions, and requirements in any contracts to ensure that rental agreements are protected from potential risks.

Ultimately, rental arbitrage can potentially yield more profit than a long-term rental, which is why it’s important for landlords and tenants alike to understand the benefits and challenges involved before making any decisions.